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Pharma Tech Outlook | Wednesday, September 22, 2021
Vertical and virtual end-to-end outsourcing will continue to grow. Increasing dependence on domestic discovery and manufacture of drugs will help the pharmaceutical outsourcing business as the coronavirus pandemic forces new methods to better prepare for future disruption.
Fremont, CA: With only a few significant competitors with global reach, the CMO/CDMO market is competitive and resistant to consolidation. The ability to differentiate services is a critical component of growing a business. A frequent tactic is to promote numerous outsourced services as a one-stop shop for manufacturers. This profitable goal is pursued in one of two ways by different CMO/CDMO companies. The first is a vertically integrated model centered on API and excipient production. The second approach is a virtually outsourced model that focuses on providing quality and regulatory services using an API source that has been obtained.
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Vertically outsourced model
Pharmaceutical companies that use a vertically outsourced model work with CMO/CDMO companies that make their own API, excipients, and components and often handle project management internally.
This one-stop-shop strategy applies to larger enterprises that collaborate with large manufacturing clients with branded products and global marketing reach.
Regulatory, quality assurance, and commercialization personnel are retained by many clients. These clients have subject-matter specialists on staff to actively communicate with the CMO/CDMO and oversee the project from start to finish because of their size.
Since, in many cases, one business manufactures the API for 100 percent of production, the vertically outsourced method provides consistency of product quality in all commercial marketplaces throughout the world.
Virtually outsourced model
Clients who use the virtually outsourced solution, as opposed to vertical outsourcing, work with their CMO/CDMO partners to source API and all components. These companies collaborate with virtual manufacturers and smaller manufacturers with limited financial and human resources.
As many virtual manufacturers are large businesses, revenue isn't the only criterion for organizations interested in the virtual outsourced model. However, many of the businesses that are taking this approach are small and have few resources. These clients, regardless of their bottom line, tend to rely on their outsourcing partner for project management activities that are typically internal functions within larger manufacturers.
Another differentiating feature of clients of CMO/CDMO firms that specialize in a virtual one-stop-shop model is their preference for regional or national initiatives. Vertically outsourced companies are more suited for global commercialization.
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